One of Second Life’s high-interest, self-styled “banks,” Ginko Financial, suspended withdrawals this morning. Ginko head ‘Nicholas Portocarrero’ (who has not previously made his real identity public, and declined to do so now) said Ginko clients are unable to withdraw funds because Ginko’s “L$ reserve has been depleted.” He continued, “we are working to replenish it, but when we add it people drain it almost immediately. It’s a bank run in essense.”

Ginko’s website currently says that withdrawals have been reactivated, but that they are subject to a L$5000 (approximately US$19) per-day cap. However, as of 10:00 AM SLT, Ginko depositors said they were unable to withdraw even that amount. The cap was previously $300,000 (approximately US$1100).

During the two hours from 9:00 AM SLT to 11:00 AM SLT, Ginko’s stated “Total Deposits” dropped L$2.1m (approximately US$8000). That amount is just over 1% of Ginko’s total claimed deposits of L$192m (approximately US$750,000).

‘Portocarrero’ said that he believes the new gambling ban “caused a panic,” which then spread. He advised Ginko clients to, “calm down, [and] stop keeping vital day-to-day cash in Ginko Financial.” He continued, “a deposit is an investment, you are not putting the money in a box.” Ginko’s website echoes this warning: “we cannot guarantee that we will always have enough to pay people quickly, though we will endeavour to do so.”

Depositors remain concerned. One Ginko client, ‘RogueRadio Park’ said that he is, “distressed, because I have been unable to access even 1 $L of my savings there.” He said that the unavailability of funds, “has kept me from doing my job for the past twelve plus hours.” Another depositor, ‘Niecey Heart,’ said that she was able to withdraw only L$1001 (approximately US$4). Both ‘Heart’ and ‘Park’ say they plan to keep trying to withdraw funds today.

Ginko’s site claims that management is “doing everything in our power” to fix what it calls the “withdrawal issues.” Ginko customers are instructed “not [to] contact customer support regarding withdrawals being unavailable,” and told that “messages regarding availability of withdrawals that do not mention a loss of funds will be deleted.”

Commentary

I’ve been following Ginko Financial since February, when a law journal concluded that it was probably a ponzi scheme and I noticed that Ginko’s yield had dropped 60% in 16 months. Though the rate has been raised since I ran that article, red flags still exist. These red flags include the fact that Ginko’s management categorically refuses to discuss Ginko’s investments or policies and the fact that (according to an interview Reuters previously conducted with ‘Portocarrero’) Ginko keeps only around 5% (and “sometimes less”) of its deposited funds available in-world in $L for immediate withdrawal by depositors. VB has always advised readers to be very careful regarding this, or any other company with near-complete opacity of investments and management, and repeats that advice now.

Updated 12:20 PM SLT, July 27, 2007

Second Life commentator ‘Gwyneth Llewelyn’ has a press release up, presumably from the Portuguese Ministry of Justice, which says that the Ministry, “in cooperation with the University of Aveiro and the Faculty of Law of the Lisbon New University, will today launch an ‘e-Justice Centre’, a mediation and arbitration centre,” in Second Life.

By “today” they mean 3 AM SLT, Friday, July 27 — about five hours after the release was posted. So unless you live somewhere other than the United States, or are an insomniac, you’re probably going to find out about this after it happened. But if you find out in time, or just want to check it out later, you can visit the Centre (nicely executed in glass, albeit with a heavy Roddenberry influence) at this SLURL.

Commentary

Given the scope of this project, it is rather odd how little press it has gotten. In fact, aside from ‘Llewelyn,’ nobody else seems to even have the release, and she posted it at 2 AM the day of the event. The quiet launch is not only a little strange, but also sort of a shame, because it looks like an ambitious, potentially controversial, project. From the press release:

The centre will provide mediation and arbitration services for avatars resident in Second Life, permitting the opportunity to decide on conflicts deriving from consumer relations or any contracts signed between parties. Users of the centre can opt to resolve submitted disputes through the application of Portuguese law or through the use of impartiality criteria.

And jumping over to the e-Justice Centre’s web site, it gets even more interesting — they say the build is actually going to be regularly staffed, a relative rarity in Second Life.

This centre provides mediation and arbitration services for all avatars in Second Life in the resolution of disputes resulting from consumer relations or any other contract-based relations signed between parties.

All mediation and arbitration processes are overseen by the Alternative Dispute Resolution Laboratory of the Faculty of Law of the Lisbon New University.

Opening hours: 3pm-6pm (UTC+1), Monday to Friday

It’s still clearly a work in progress — both the “Processes” and “How it Works” pages are “under development,” but it looks worth keeping an eye on.

Organizers say they are going to try to run a video feed of the RL ceremonies in to Second Life. Proceedings at the Centre will be bilingual (English and Portuguese, presumably), though according to the release, the ceremonies this morning will be in Portuguese only.

On the off chance that there’s a Portuguese-speaking reader out there, and you can attend this and post something in the comments, I know other readers would very much welcome a description of the ceremony and would like to learn more about the procedures and processes they’re hoping to put in place too.

Second Life creator Linden Lab posted a policy clarification regarding gambling today, and it’s far more restrictive — and far more clear — than anything we’ve seen before. Though the subject of some debate, most commentators agreed that Linden Lab was flirting with trouble under its earlier policy given existing U.S. law. No longer.

Gone are the vague weasel words about advertisements “appearing to relate to simulated casino activity.” Gone are the easy outs for “Kasinos” and “Games.” They’re making it pretty clear here: “it is a violation of this policy to wager in games in the Second Life environment operated on Linden Lab servers if such games (1)(a) rely on chance or random number generation to determine a winner, OR (b) rely on the outcome of real-life organized sporting events, AND (2) provide a payout in (a) Linden Dollars, OR (b) any real-world currency or thing of value.”

They say they will actively enforce this, and outline some serious penalties that range from object removal to reporting the activity to real-world authorities.

The policy states, “If we discover gambling activities that violate the policy, we will remove all related objects from the inworld environment, may suspend or terminate the accounts of residents involved without refund or payment, and may report any relevant details, including user information, to authorities and financial institutions.”

My take on all this follows, and it might not be what you think.

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The Second Life Community Convention has published the schedule for the Business Track for this year’s SLCC in Chicago. It includes a presentation entitled “IP Rights and the Law in Second Life” that will be conducted by conference organizer and Second Life entreprenuer and consultant Tim Allen (‘FlipperPA Peregrine’ in Second Life), Frank Taney (a litigation partner at Buchanan Ingersoll & Rooney, and Allen’s attorney and occasional business partner), and Eros/Strokerz Toyz head Kevin Alderman (‘Stroker Serpentine’ in Second Life). The presentation is currently scheduled for 10:30 AM in the Business Track Room, on Saturday, August 25.